John Mauldin on Social Security and Ponzi: Have America's Parents stolen thier children's inheritance?

"As long as each succeeding generation is willing to pay and is large enough,
SS can go on.

But now we have trillions in unfunded liabilities.

...anyone with a neuron firing knows there is no lock box and the Social Security funds are an entry into a government accounting book that don't really exist except as an IOU.

Politicians of all stripes have used the Social Security money to pay for other government expenses.

Those funds were even counted to offset the deficit, although now that Social Security is no longer in a surplus, ...that has gone away.

...The classic Ponzi is where you get money from one group and then find another group to pay the "returns" to the first, and so on, until you run out of people and the game is up.

[Charles] Ponzi...took money from one group, telling them they would get it back later, and then spent the money with another group, telling them the same thing.

The difference between a Ponzi and Social Security is that SS is legal and is done in full view of the public with everyone knowing the deal.

Social Security is structured from the point of view of the recipients as if it were an ordinary retirement plan:

 

what you get out depends on what you put in.

 

So it does not look like a redistributionist scheme.

 

In practice it has turned out to be strongly redistributionist, but only because of its Ponzi game aspect, in which each generation takes more out than it put in.

 

Well, the Ponzi game will soon be over, thanks to changing demographics,so that the typical recipient henceforth will get only about as much as he or she put in (and today's young may well get less than they put in).

Paul Krugman, 1996

...President Franklin Delano Roosevelt...created the Social Security Act in 1935.

He put the retirement age at 65...four years above the average life expectancy.

...In 2003 life expectancy was up to 77

...Today it is 79 and change.

...Under today's laws one could retire at 62 or 65 or 67 and, if you just lived an average lifespan, get far more in benefits than you paid in.

...If Social Security had been set up to track life expectancy in 1935, when it was formed, then retirement would be set at 83 or 84 today!

Not exactly the golden-years concept, is it?

Mauldin